Last week I spent a fair amount of time discussing the new Iraqi 11 protein HRW business, and estimated at least 500,000 tonnes would flow from the USA. The November WASDE update increased USA HRW exports by 25 million bushels, which is 680,400 tonnes… The futures rallied a bit, and technically appear to have at least stabilized, or possibly, maybe…trying to put in a bottom. The problem with that “bottoming” line of reasoning is if the KC futures get too rambunctious, and run away from the business, exporters could switch to other locations, such as Germany, or Australia, and secondly…corn futures are in the tank. USA wheat feeding was not expected to be a feature this year, although new-crop wheat next summer may need a feed-lot backstop just in case the protein is low for the third year in a row, but the widening wheat-corn spread will prevent the possibility. Wheat feeding in The Plains happens when KC futures approach a 50c premium (or less) to corn futures, especially when the basis is under duress, as it has been the past few years. This is a weekly continuous chart of KC futures- corn futures (black line), with a blue line of KC July18 – July corn 18. The red horizontal line is 50c premium wheat over corn…

Currently, KC Z is about 88c over Z corn, and July18 wheat is +103 over July corn, as KC wheat has a bigger carrying charge.

Right now, at these price relationships, wheat feeding would be a very small amount next summer, which is fine, as long as we don’t really need it.

Maybe the summer of 2019 will be different, because in my opinion, corn prices are bad enough we should see a decrease in corn acreage this spring. Did any of those corn acres go into winter wheat, or will they all go into soybeans? That’s an interesting question, but we won’t know the answer for a while.

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